Executive compensation
Executive Compensation is how top executives of business corporations are paid. Salary is taxable to an individual at a high individual rate. If part of that income can be converted to capital gain, for example by granting stock options to executives, a more advantageous tax treatment may be obtained.
In a typical modern US corporation, the CEO and other top executives are paid with a mixture of cash and shares of the company (which could immediately be sold and redeemed for its value in cash). For example a highly paid CEO would get 1 million cash, and 10 million in shares of the company.
Other components of an executive compensation package may include such perks as generous retirement plans, a chauffered limosine, an executive jet, interest free loans for the purchase of housing, etc.
There are many contraversies in the field of executive compensation:
==Charges that CEO's are paid too much
Many people believe CEO's are paid too much. Others counter that this is necessary to retain the best talent. This argument however is countered by those who say that true price competition does not occour at the CEO level, because their pay is set by the board of directors-a group usually almost tottaly composed of CEO's of other companies (see http://www.theyrule.net).
==Stock Grants and Stock Options
As of 2004, CEOs are paid mostly in Stock Options or Stock Grants with a small percentage of their pay being in the form of a normal cash salary. Supporters of Stock Options say that it aligns the self interest of the CEO to that of the company, since stock options are only worth money if the stock price increases. Restricted Stock on the other hand, is simply stock given to the CEO which must not be sold for a certain amount of time. Stock Options are heavily critized however for being exessively granted, and many have called for options to be counted as an expense.
